PROVINCE OF SASKATCHEWAN INVESTOR PRESENTATION May 2018
THE SASKATCHEWAN DIFFERENCE Economic Stability Diversified economy balances cyclicality of resources Growing population Majority government with strong mandate Fiscal Responsibility Budget 2018-19: On Track to return to balance in fiscal 2019-20 No major new tax changes Continued targeted infrastructure investments Financial Flexibility Among lowest provincial debt levels in Canada Low reliance on federal transfer payments Strong credit ratings 2
DIVERSIFIED 2016 REAL GDP BY INDUSTRY Education & Healthcare 11% Government Services 6% Agriculture, Forestry, Fishing & Hunting 6% Business Services 9% Mining and Petroleum 21% Finance, Insurance & Real Estate 14% Wholesale and Retail Trade 11% Transportation, Warehousing & Utilities 7% Manufacturing 7% Construction 7% 3 4
TRADE- DRIVEN 2 nd highest level of exports among Provinces 39% of GDP 5
RENEWABLE AND NON-RENEWABLE RESOURCES 5
ECONOMIC OVERVIEW SASKATCHEWAN KEY ECONOMIC INDICATORS (2017 over 2016) 15 12.6 Per Cent Change 10 5 0 4.0 7.2 Retail Wholesale Sales Source: Statistics Canada 8.0 New Cars Mfg Sales 8.7 Exports 10.9 Bldg Permits 2.7 Housing Starts Many of the key indicators posted strong growth in 2017 While some investment indicators were down slightly in 2017, they remain high in an historical context 6
GROWTH RETURNS IN 2017 Saskatchewan Economic (Per Cent Change Unless Otherwise Noted) 2017 2018 2019 2020 2021 2022 Real GDP 1.5 1.3 2.5 2.6 2.2 1.9 Nominal GDP 4.9 4.0 4.3 4.2 4.6 4.5 CPI* 1.7 2.3 1.8 1.8 1.9 1.9 Employment Growth (000 jobs)* (0.9) 2.5 4.6 5.4 5.3 5.1 Unemployment Rate (%)* 6.3 6.1 5.9 5.7 5.5 5.6 Retail Sales* 4.0 2.7 2.5 2.3 2.6 3.0 * 2017 Actual Signs in 2017 that the economy is rebounding from recent challenges include: Population reached 1,169,752 as of January 1, 2018, an increase of 13,410 from January 1, 2017. Manufacturing sales grew by 12.6 per cent and new motor vehicles sales were up by 8.0 per cent in 2017, the fourth-highest percentage increases among provinces. Oil production and value of sales were up by 5.4 per cent and 33.9 per cent in 2017, respectively. Potash production and value of sales were up by 13.1 per cent and 13.9 per cent in 2017, respectively 7
Thousands of People Number of People STRONG EMPLOYMENT AND POPULATION FUNDAMENTALS SASKATCHEWAN EMPLOYMENT 600 2008-2017 Average (550.5) 550 500 450 400 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Source: Statistics Canada 1998-2007 Average (477.1) SASKATCHEWAN POPULATION GROWTH (January 1) 20,000 15,000 10,000 5,000 0-5,000-10,000 Source: Statistics Canada 2008-2017 Average (+16,120) 1998-2007 Average (-2,319) 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 8
COMPETITIVE TAX AND UTILITY RATES 2 nd lowest personal taxes among provinces 2018 INTERCITY COMPARISON OF TAXES AND UTILITIES (FAMILY AT $100,000 TOTAL INCOME) Competitive business tax environment Total Household Utility Costs comprised of: home heating, electricity, telephone and auto insurance. Source: Ministry of Finance, Budget 2018-19 9
2018-19 BUDGET ($M) Budget Forecast Budget 2017-18 2017-18 2018-19 Revenue 14,165.1 13,943.0 14,243.5 Expense 14,811.1 14,538.0 14,608.8 Adjustments (50.0) - - Surplus / (Deficit) (696.0) (595.0) (365.3) 2018-19 Budget $365M deficit Revenue up 0.6% from 2017-18 Budget / up 2.2% from Q3 Expense down 1.4% from 2017-18 Budget / up 0.5% from Q3 10
2018-19 BUDGET HIGHLIGHTS The Plan: Budget 2017 established a 3-year plan to restore balance by controlling spending and reducing dependence on volatile resource revenue Budget 2018: Controls spending while providing important investments in health care, education and social services Supports continued economic growth Continues on the course to restore a balanced budget by 11 2019-20 12
2018-19 REVENUE MEASURES Maintaining last year s efforts to shift reliance from volatile resource revenues to consumption taxes No increases to tax rates PST, income taxes, EPT and no carbon tax New initiatives Saskatchewan Value-added Agriculture Incentive Saskatchewan Technology Start-up Incentive 13
BALANCED REVENUE SOURCES TOTAL 2018-19 REVENUE $14.2B 13
CONTAINED EXPENSE GROWTH TOTAL 2018-19 EXPENSE $14.6B 14
Millions of Tonnes US$/Barrel # of Wells Drilled COMMODITY PRODUCTION WTI OIL PRICE AND OIL WELLS DRILLED 180 160 140 120 100 80 60 40 20 0 Forecast 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Oil Wells Drilled WTI Oil Price Source: Ministry of Energy and Resources SASKATCHEWAN CROP PRODUCTION 40 35 30 1998-2007 Average (23.8) 2008-2017 Average (31.2) 25 20 15 10 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 Source: Ministry of Agriculture 15
RESOURCE ASSUMPTIONS RESOURCE ASSUMPTIONS: 2018-19 2019-20 2020-21 2021-22 WTI Oil Price (US$/bbl) 58.18 59.75 63.50 69.00 Differential (% of WTI) 22.1 19.8 17.7 16.7 Production (million barrels) 177.7 181.0 183.4 185.5 Potash Price (US$/KCl tonne) 191 194 197 201 Potash Sales (million K 2 O tonnes) 12.6 13.2 13.6 14.0 Canadian Dollar (US cents) 78.34 79.65 81.55 82.58 Sensitivities to Budget Assumptions Change Net Impact ($M) Oil Price (WTI US$/barrel) $1 16 Exchange Rate (USD/CAD) 1 cent 21 Potash Prices (US$/KCI tonne) $10 35 17
RETURN TO BALANCE MEDIUM-TERM FINANCIAL OUTLOOK ($M) 2018-19 2019-20 2020-21 2021-22 Revenue 14,244 14,761 15,114 15,518 Expense 14,609 14,755 15,006 15,306 Surplus (Deficit)* (365) 6 108 212 Revenue growth 1.6% 3.6% 2.4% 2.7% Expense growth -1.4% 1.0% 1.7% 2.0% 18
TARGETED INFRASTRUCTURE INVESTMENTS 2018-19 Infrastructure Investments ($B) Saskatchewan Builds Capital Plan 1.2 Crown Corporation infrastructure investments 1.5 Total Infrastructure Investment 2.7 SaskPower = $883M SaskTel = $298M SaskEnergy = $268M SaskWater = $34M SASKATCHEWAN BUILDS CAPITAL PLAN ($ Millions) 2,000 1,800 1,757 1,582 1,600 1,400 1,200 1,000 800 600 551 1,361 927 1,174 612 780 823 954 1,154 1,241 854 746 772 400 200 0 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18F 2018-19 2019-20 2020-21 2021-22 18 19
MANAGEABLE DEBT LEVEL ($M) (As at March 31) Budget Forecast Budget 2017-18 2017-18 2018-19 GRF - Operating 5,750.0 5,750.0 6,150.0 - SK Builds Capital Plan 2,755.6 2,751.7 4,193.8 Other GSO Debt 556.9 526.1 431.3 GSO Debt 9,062.5 9,027.8 10,775.1 GBE Debt 9,137.5 8,724.0 9,259.8 Second lowest Net Debt to GDP ratio among provinces Public Debt 18,200.0 17,751.8 20,034.9 $2.28B increase in total public debt from 2017-18 Up $1.44B for SK Builds Capital Plan Up $400M for GRF operating Down $95M for other GSOs Up $536M for GBEs 20
CONSERVATIVE DEBT MANAGEMENT Domestic issuance focused, no FX exposure Focused on longer term issuance 17+ years average term to maturity of term debt Sinking Fund currently $2.0B Significant short-term borrowing capacity Promissory Note authority up to $4.0B Accessed $232M prom note financing in F2017-18 Modest near-term debenture maturities 21
2018-19 BORROWING PROGRAM * *includes $600M of pre-borrowing 21
DEBT PORTFOLIO as at March 31, 2018 23
STRONG CREDIT RATINGS RATING AGENCY CURRENT RATING LONG-TERM CURRENT RATING SHORT-TERM MOODY S Aaa Not Rated STANDARD & POOR S AA A-1+ FITCH AA F1+ DBRS AA R-1 (high) April 2018 24
Province of Saskatchewan CONTACT INFORMATION: Rod Balkwill Denise Macza Executive Director Associate Deputy Minister 1 (306) 787-9473 1 (306) 787-6780 rod.balkwill@gov.sk.ca denise.macza@gov.sk.ca